RBI Bonds vs FD vs SGB – Which is Better for Investment in 2023?
Tax Saving Bank Fixed Deposits (FD) are the traditional investment vehicle for most Indian households.
According to a recent RBI report, approximately 50% of household financial assets in India are in FDs.
Let’s come to the point. If you are planning to invest this year, and are looking for no-risk avenues, then RBI Bonds and fixed deposits are good options to consider.
In addition, you can also consider Sovereign Gold Bond. However, some people might argue that a gold bond is a low-risk investment since its gold price can drop or rise due to external parameters.
So, which one should you opt for? How do you choose between the three – RBI Bonds vs FD vs SGB?
Here are some points that can help you make the decision.
Let us start with the common features of these three schemes:
|Who can invest?||1– A person resident in India,|
A – in her or his individual capacity, or
B – in individual capacity on a joint basis, or
C – in individual capacity on anyone or survivor basis, or
D – on behalf of a minor as father/mother/legal guardian
2– A Hindu Undivided Family
|Where to buy?||Through banks (Online/Offline).|
|Payment||Payment can be made through cash or cheques or demand draft or electronic fund transfer.|
RBI Bonds vs FD vs SGB
|Parameter||RBI Bonds||Tax Saving FD||SGB|
|Maturity period||7 years||5 years||8 Years.|
|Interest rate||7.35%||4.50% – 6.75%||The return from SGBs are in terms of interest and capital appreciation. Investors get a fixed interest rate of 2.5% per annum.|
Furthermore, it is over and above the gold price return.
|Minimum Investment||INR 1000/-||INR 1000/-||1gm/finally Year|
|Minimum Investment||No maximum limit||1.5L||Maximum of 4kgs wherein for trusts and similar entities max ceiling is 20kgs.|
|Tax benefit on investment||No tax benefit on investment||Investments up to Rs. 1.5 lakh deductible from taxable income under Section 80C.||No tax benefit on investment|
|Tax treatment of interest||Interest is added to income and taxed according to your slab||Interest is added to income and taxed according to the income slab||TDS is not applicable|
|Calculation of interest||Half-yearly compounded basis||Cumulative, on maturity||SGB offers a 2.50% fixed interest rate per annum.|
|Interest payments||Cumulative or non-cumulative (payable half-yearly)||Cumulative, on maturity||non-cumulative (payable half-yearly)|
|Loan facility||Not eligible for collateral||Can be used as collateral||Yes|
|Risk Factor||No-Risk||No-Risk||Low Risk|
|Premature withdrawal||Premature redemption shall be allowed for specified categories of senior citizens only.||No||Premature withdrawal is applicable only after the 5th year onward on the coupon payment date and is also tradeable if held in Demat form.|
|Senior Citizen Benefit||They may take a premature exit after 4, 5, and 6 years based on age group.||Most of the banks provide FD rates to senior citizens at an extra rate of 0.25% – 1.00% (approx.).||NA|